EV Battery Giant CATL's Profit Dives Over 20% in Q1, Hit By "Huge" Material Inflation

若离

若离

· 4月30日

CATL executives thought the price would have risen about 20% to 30% but it turned out that it shockingly shot up to as high as RMB500,000 in Q1, twenty times more than a year earlier. They said the company was set to raise price in Q2 as the spike in material prices was "too huge" to bear.

BEIJING, April 29 (TMTPOST)— The raw material inflation is so overwhelming that China’s largest power battery manufacturer Contemporary Amperex Technology Co. Ltd. (CATL) admitted quite a lot of of performance volatility resulted from its misjudging the rising cost of a key material used in electric vehicle (EV) batteries.

Source: Visual China

In the first quarter of the year, CATL posted revenue of RMB48.68 billion (US$7.41 billion) with a 153.97% year-over-year (YoY) increase, while its net income plunged 23.62% YoY to RMB1.49 billion (US$226.69 million) and gross margin was just 4.38%, down 12.8 percentage points from a year ago.

The profit decline underlines how material inflation weighs on the whole auto supply chain. “We didn’t expect the price of lithium carbonate had soared that much,” said executives of CATL at an earnings call on Friday. They thought the price would have risen about 20% to 30% but it turned out that it shockingly shot up to as high as RMB500,000 in the first quarter, twenty times more than a year earlier, the management noted. To illustrate the difficulty, they noted the price of lithium carbonate has been surging since the start of 2021, and prices of materials including electrolyte even saw more than 1700% YoY jump in March alone. These rising costs brought so much pressure on CATL’s operation that the company had to discuss with customers to handle the raw material cost together as the spike in material prices was “too huge” to bear. Executives said CATL had basically determined the price hike and customers expressed their understanding and support. The hike, which is set to take place in the current quarter, is launched to protect the industry chain itself, they stressed. “Actually, competitors are looking forwarding to our raising price so as to follow up,” they added, though not disclosing the exact price rise or the range.

Tesla, CATL's largest customer who accounts for 10% of its turnover last year, last month raised the prices of vehicles sold in China three times in a week. Tesla CEO Elon Musk highlighted his serious concern over "significant recent inflation pressure in raw materials and logistics" in a tweet that month. “I think the official numbers actually understate the true magnitude of inflation. And inflation appears to be likely to continue for at least the remainder of this year,” Musk underscored the concern again at last week’s first quarter earnings call. He also noted some unnamed part suppliers are requesting 20% to 30% cost increases from 2021 to 2022.

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